Provident Fund Detail: Know what will be the problem after deducting more money , how much will be tax This income tax should be recovered by deducting their salary.
The formula for adding more amount to the Provident Fund Khata for government employees can now be costly. Because the Income Tax Department will levy tax on deducting excess amount in PF (Provided Fund) account. Let us tell you that in the last budget itself, Finance Minister Nirmala Sitharaman had imposed a cap on tax free contribution of up to Rs 2.5 lakh in the PF account of private job holders. After that, the limit of tax free contribution to GPF (General Provident Fund) was also imposed on government employees. This limit is Rs 5 lakh per annum. This deduction will start from 1st April 2022.
Will be deducted from salary
Now the order has come that government employees who have deducted GPF above Rs 5 lakh should be taxed heavily on their interest income. This income tax should be recovered by deducting their salary. The Government’s Accounts Office has said that the CBDT has implemented the Income-tax (25th Amendment) Rule 2021. With this, the maximum tax free contribution limit in GPF has been made applicable to Rs 5 lakh. On top of this, if the employee has made further deduction, then the interest income will be treated as income and will be taxed. It will also be mentioned in Form 16.
Tax free interest income
The Union Finance Minister had announced in Budget 2021 to limit the tax free annual PF contribution to Rs 2.5 lakh to take advantage of tax free interest income. However, later this limit was increased to Rs 5 lakh. The limit of 5 lakh was for those employees in whose case the employer does not contribute. This benefited the government employees. However, tax professionals and PF experts had called it wrong.
Contribution to GPF
The government had given this relief for contribution to the General Provident Fund (GPF). A facility which is available only to Government servants and where no contribution is made by the employer. However, before the budget 2022, news was coming that the government should equalize the limit of tax free PF contribution of private and government employees. but that did not happen. Let us inform that at present, 7.1 percent interest is being available on GPF. At the same time, the interest rate of PF account is slightly higher.
